The Buyer Or Seller: Who Really Should Pay Estate Agents Fee?

The Real Estate sector has become lucrative and it is contributing in its own way to curbing unemployment in Nigeria. There are different levels of people involved in Real Estate business, but there is a particular set of people in the industry who are not without controversy, as regards who pays them or should pay them. These people are the Estate Agents.

An Estate Agent is a person or business that arranges the selling, renting or management of properties, and other buildings. An agent that specializes in renting is often called a letting or management agent. Estate agents are mainly engaged in the marketing of property available for sale and a solicitor is used to prepare the legal documents.

At every point there are always people searching for specific types of properties to buy or lease/let, and whatever they are seeking for is definitely available somewhere. The job of an estate agent is to connect these two groups together for a fee or a portion of the fees popularly called ‘agency fees’.

This brings us to the controversy; who really is responsible for this “agency fees”?

In trying to make things clear, this article will make some juxtapositions between how it is done in other countries and how it is done in Nigeria.

In the United Kingdom, Estate agents who handle letting of commercial property normally charge (the owner of the property) a fee of 7 to 10% of the first year’s rent, plus the first month’s rent. If two agents are charging 10%, they will split the fee between them. Estate agents selling commercial property (known as investment agents) typically charge 1% of the sale price.
The fees charged by residential letting agents vary, depending on whether the agent manages the property or simply procures new tenants. Charges to prospective tenants can vary from zero to £300 in non-refundable fees usually described as “Application”, “Administration” or “Processing” fees (or all three). There are no guidance for letting agents on charges, except that they are forbidden by law to charge a fee for a list of properties. Otherwise, they are free to charge as they please.

In many other parts of the world, the seller, in return for bringing a buyer to the table, agrees to pay a commission to the agent. Typically, this fee is represented as a percentage of the sales price and could also be shared between the listing agent and the agent who brings the buyer, in cases where two agents are involved.

In Nigeria, the buyer pays the agent fee after paying the seller of the property. This has always left a lot of buyers disgruntled as they do not understand why an agent fee has to be paid, when the seller ought to be the one paying his agent.

According to homebuying.com:

It can be argued and, quite rightfully so, that the buyer always pays the commission. Why? Because it’s typically part of the sales price. If the seller did not sign an agreement to pay a commission, the sales price might have been lowered. And there lies the appeal of buying homes through unrepresented sellers because, given the same logic, those prices should show a net sales price without a commission. But those sellers haven’t quite figured this out yet which causes potential buyers of those listings to be consistently disappointed.

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